China Construction Bank Corporation

Dear investors, analysts, friends from the media, ladies and gentlemen, good afternoon. Thank you for joining us in the 2022 annual results announcement conference by China Construction Bank. Thank you very much for your support and interest in the CCB. The results announcement conference today is held in Hong Kong and Beijing simultaneously through a video link. This conference is also live streamed for shareholders, investors and the public. With us in person in Hong Kong are Mr. Zhang Jingliang, the President. Mr. Wang Bin, Vice President. Mr. Sun Liurong, the Chief Financial Officer. In Beijing, Mr. Cui Yong, Vice President. Mr. Zhihong. Mr. Li Yun. Mr. Chen Yuan Guo. Today, we also have Mr. Xu Jian Dong, Equity Shareholder Representative, and Mr. Wang Yi, Supervisor Representative. They are with us in the Hong Kong venue. And we have Ms. Liu Fang, Ms. Li Lu, shareholder representatives and Mr. Zhao Xijun, supervisor representative in Hong Kong and Beijing. Present are also persons in charge and personnels from relevant departments of the headquarters. The results of our bank for 2022 have been disclosed yesterday. and the results presentations have been published on the bank's website for your review. Before we take questions, Mr. Zhang Jinliang will give a presentation on the business operation of 2022 of the bank. Mr. Zhang, please. Dear investors analysts and friends from the press good afternoon welcome to this results announcement conference i'd like to express my sincere gratitude for your continued interest trust and support today we are here again in hong kong seeing so many old and new friends face to face i'm very pleased Next, I'd like to report to you on CCB's overall operation of last year and the focus of our work in the next phase. In the past year, we have thoroughly implemented the decisions of the CPC Central Committee and the State Council, adhered to the general keynote of seeking progress in stability, insisting on high-quality development, carried out the new development concept precisely and continued to strengthen the customer base and the quality and efficiency of operation and dealt with risk challenges and achieved good operation and financial performance. By the end of 2022, Total assets exceeded 34 trillion RMB, representing an increase of 14.37%. Credit investment and bond investment achieved rapid growth. Total liabilities 31.72 trillion RMB, up 14.77%. Deposits exceeded 25 trillion RMB, an increase of 11.81%. Net interest margin 31 million up. The net interest margin was 2.02%, ROA 1%, ROE 12.27%, comparable to the leading level of the industry. The NPL ratio, 1.38%, down 4 basis points from the beginning of the year. The provision coverage ratio is 241.53%, capital adequacy ratio 18.42%, resulting a steady increase in asset quality and risk resilience. We have continued to create value for our shareholders. Since the listing of our edge shares in 2005, CCB has paid a total of 1.0357 trillion RMB in dividends. The board meeting held yesterday recommended a cash dividend of RMB 0.389 per share for 2022 to all shareholders, totaling 97.254 billion RMB, a dividend payout rate of 30% in recent years. In the past year, we insisted on strategic leadership, integrating our development with the national development. We continue to cultivate new business momentum with traditional advantages, serving the new development pattern with new financial practices. We explore new modes of support of real estate development, actively participated in rental housing business and initiated the first rental housing fund in China and build a complete service loop from investment, financing, management and exit. We lit the inclusive finance market with a loan balance of 2.35 trillion RMB up more than 25% making our bank the largest financial institution in the world in terms of inclusive finance supply. We stimulate business growth potential with financial technology with agile in responding to business needs internally and empowering social governance externally. We have built the brand of CCB Cloud and accelerated the construction of digital infrastructure. We have built a comprehensive financial service system for rural revitalization. The balance for agricultural loans exceeded 3 trillion yuan and public loans in counties exceeded 2 trillion yuan bringing financial liquidity to revitalize the rural areas. The balance of green loans exceeded 2.75 trillion yuan, an increase of more than 40% and a record high, which strongly supported the green transformation of infrastructure. Clean energy and clean conservation and environmental protection made CCB a green bank. The digital operation continued to be deepened. The twin star ecosystem of mobile banking and CCB life has begun to bear fruit. The number of mobile banking users reached 440 million. The number of users of CCB life reached 100 million. We have undertaken the issuance of government consumption vouchers in more than 220 cities, helping to expand domestic demand and boost consumption. Over the past year, we have focused our main business and responsibilities adhered to serving the real economy, deepening the structural reform on the supply side, and strive to achieve a virtuous cycle and co-prosperity between finance and real economy. First, we continue to increase financial support and implement financial policy in a full and targeted manner, providing support to the economy in the down cycle. We have added 2.39 trillion yuan in loans, an increase of more than 370 billion yuan year-on-year and added 935.6 billion yuan in bond investment and maintained the top position in the market in terms of underwriting volume and subscription ratio of government bonds providing strong support to the rapid stabilization of the economy. At the same time, we also actively expanded funding channels, enhanced the ability to expand deposits and reduce costs, and maintained the coordinated development of assets and liabilities. Second, we optimized the resource allocation structure. Through strategic layouts, we optimized financial resources to specific areas and improving assessment mechanisms. We support major regional strategies and coordinated development. Beijing, Tianjin, Hebei, Yangtze River Delta, Greater Bay Area, and Chengdu, Chongqing regions have increased their shares in our business. The credit in central and western and northeast China have increased year on year. The balance of infrastructure loans, 571 trillion yuan, an increase of more than 12%. The balance of loans invested in manufacturing industry is 2.24 trillion yuan, an increase of more than 32%. The balance of strategic emerging industries is 1.47 trillion yuan. support the stable and healthy and at the real estate market increase the credit support for high-quality property developers guaranteeing the delivery of beauty with targeted financial services thirdly we continue to improve the ability to create value by adhering to asset light and capitalized strategies giving full play to the group's multi licenses and enhancing the comprehensive financial service capacity we will need to strengthen our services to small and medium sized customers and long tail customers and adjust our asset allocation strategy according to the market situation, improve the yield of our assets, striving to expand low-cost settlement funds and tap into the revenue potential of refined management. Over the past year, we have adhered to the customer-oriented approach, integrated and optimized our three business segments, corporate, financial, personal and capital management, to better serve our clients with focus and strive to create value for our customers. Our corporate finance has been steadily advancing. We built a leading scale and convenient service system for public customers and corporate customers with 9.35 million institutional customers. The amount of non-discounted loans to public customers increased by 1.43 trillion. The personal finance business contributed more value. We continue to deepen our stratified, grouped, and graded personal customer management system. Personal customers have reached 739 million, accounting for 56.65%. Personal loans amounted to 82.4 trillion RMB, maintaining its position as the number one bank in retail credit. Personal consumer loans amounted to around 300 billion RMB up 26%. Personal loans and farmer loans among other products have been growing very well. The bank promoted the deep integration of digital services and wealth management managing nearly 17 trillion RMB in financial assets for personal customers, a record high. The capital management business developed steadily. The group maintained its professional and prudent position and enhanced its comprehensive service capabilities. The asset size of its financial market business exceeded 9 trillion. The asset management scale is 5.79 trillion. under custody is around 19 trillion. Maintaining its industry leadership, the group also depend its financial service system for the elderly and ranked first in the industry for pension wealth management.

Over the past year, we have promoted the improvement of our comprehensive risk governance system and strengthened the three lines of defense of business operations, risk control, compliance, and auditing so that our risk management capabilities have continued to improve and effectively supported high-quality development. We continue to strengthen our credit risk control by adhering to the concept of comprehensive whole process, whole staff in whole situation. and performed well in key areas, with NPL of public loans falling by 19 bps, and the quality of loans in infrastructure manufacturing and wholesale and retail sectors further improved. We actively and steadily helped to resolve risks in the real estate sector, and the quality of related goods and services was at a better level in the industry. Risk classification was prudent and solid, with the overdue rate 35 bps below the NPL rate and overdue NPL negative price scissors of RMB 74 billion. The risk monitoring and early warning system provided 98% of early warning coverage for large and medium-sized accounts with an average advance of 29 months. Eighty-seven percent of early warning coverage for SMEs with an average eight months ahead of time in terms of the warning promote early detection and control of credit risk. We strengthen the control of market risk, liquidity risk, cybersecurity risk. and any other new types of risk and continue to promote the construction of a digital universe compliance system with solid effective and anti money laundering network and safe and stable business operations over the past years ccb's business development has been widely recognized behind our achievements We have benefited from our faithful adherence to the decisions and deployment of the Central Party Committee and the State Council, our thinking and exploration of the laws of economic and financial development, the joint efforts of the Group's 380,000 employees, and the support and the companionship of our customers and shareholders. this is the inaugural year of the comprehensive and thorough implementation of the spirit of the thirtieth party in addition the twentieth party congress drew up a grand blue print to promote the great rejuvenation of the Chinese nation, and after the two sessions, Premier Li Qiang attended a press conference and answered questions from the journalists summarizing the outlook for the Chinese economy. It will break winds and waves and sail towards a bright future. Despite the great uncertainties in the international economic and financial markets, we are confident and full of expectations for the long-term positive future of the Chinese economy. CCP will actively seize the vast opportunities in China's modernization process, fully accurately and comprehensively implement the new development concept, ride the momentum and strive to achieve new breakthroughs in quality development. in the new year we will maintain our strategic determination deepen our financial initiatives and promote the convergence of the first and second curves we will consolidate our first mover advantage in housing leasing strongly support the construction of subsidized rental housing actively participate in the issuance of rental housing bring into play the demonstration effect and driving role of housing leasing funds explore new models of real estate financial services and contribute to the stable and healthy development of the real estate market promote the construction of a greater inclusive finance ecosystem and improve the new digital inclusion model, we will vigorously promote the application of the Huidongyi platform, promote the building of ecology and smooth operation, and consolidate our leading position in the market of inclusive finance, strengthen the empowering role of financial technology, continue to improve our technological governance capabilities, improve our R&D and operation structure system, strengthen our digital operation capabilities and deepen the integration and development of the twin stars of mobile banking and ccb life in the new year we will firmly fulfill our mission and give full play to our strengths to serve the real economy construction bank was born out of construction and has thrived because of wherever there is construction there is a construction bank and this has been deeply rooted in our dna we will continue to enhance our ability to serve the country's construction continue to increase our credit investment support the promotion of major national strategies and do a good job in supporting the financing of the two new and one priority we will help develop the basic role of consumption and the key role of investment accelerate the development of personal consumption credit effectively meet reasonable housing finance needs and strengthen resources going in manufacturing science technical innovation green and low carbon areas we will deepen and deepen the layout of common prosperity finance help serve the revitalization of the countryside actively explore County business expansion models improve the integrated online-offline service system for the revitalization of the countryside and promote the expansion and penetration of products and services such as Unonexpress. With the power of financial technology, financial services are seamlessly integrated into the production and lives of urban and rural residents, making financial services a basic right available to everyone and a tool for the public to pursue a better life. In the new year, we will accelerate the construction of a customer group grading stratification and classification management system, deepen group synergies and comprehensively improve the marketing and the service capacity of our customers as well as deepen the integrated operation. The competition for commercial banks is ultimately a competition for customer service capabilities We will continue to improve the group's integrated management system, strengthen the synergy between the parent and subsidiary, the head office and branches, the various business segments, domestic and overseas branches, and the online and offline sector, so as to enhance the overall management synergies and meet the integrated and diversified financial needs of the customers. deepen the synergy between financing and intelligence continue to optimize the layout of assets drive the development of price setting consultancy settlement investment banking and trading business and accelerate the transformation to light asset and light capital strengthen the integration of domestic and foreign currency operations effectively consolidate the foundation of foreign currency business capacity further enhance the level of cross-border business services and strengthen the ability to participate in international competition deepen the balanced development of asset and liabilities optimize the allocation of major types of assets and liabilities strengthen the measures to stabilize and increase deposits balance quantity price risk and strive to achieve a unified development in terms of a quality structure scale speed efficiency and security in the new year we will enhance our bottom line thinking better coordinate development and safety strengthen market research and judgment strive to stay ahead of the market cycles and risk curves firmly guard the bottom line of risk compliance we will always respect and follow the laws of financial development insist that our business operations are bounded by our risk management capabilities and always give top priority to improving the quality and efficiency of our development we will continue to optimize and improve our comprehensive active and intelligent modern risk management system improve the group's unified credit risk management system and ensure that the core indicators of asset quality are in a reasonable range we will pay close attention to financial market fluctuations in international developments and guard against new types of risks and external shocks continue this continuously strengthen internal control compliance and any AML capacity building to effectively protect the rights and interests of financial consumers. Standing at a new historical starting point, we will ride on the wind of the era of Chinese modernization, create a better future with practical work and continue to create greater value for our clients, shareholders and society. Thank you all.

Thank you Mr. Zhang. Now we will take questions. This conference is taking place in both Hong Kong and Beijing, we have a lot of investors joining us. So we will alternate questions between Hong Kong and Beijing conference rooms. So more analysts will have opportunities to ask questions. We suggest that you limit your questions to only one each time. And before that, please identify yourself and your affiliation. We will start from the questions in Hong Kong. The gentleman on the third row, thank you for the opportunity. My name is Richard Chu. I come from Morgan Stanley. Congratulations on the stable performance of CCB last year was full of challenges but despite that most of the indicators have shown very steady growth. What are the drivers behind this stable performance? In 2023, the economy is becoming stable and it's moving upwards. So do you have any other new plans and new strategies to address that? Thank you. Thank you, Mr. Xu. In 2022, faced with complex situations, the CCB implemented the deployment of the CPC Central Committee and the State Council and achieved a stable and excellent business performance. Last year, net profit was up by 6.33%. ROE maintained at a comparable level. The first-tier capital has increased instability. Net NPL ratio is down steadily and the provision level is on the rise. Liquidity risk indicators have been in line with the regulatory requirements. Last year was a difficult year. We have a balance between security liquidity this is hard one faced with the risks in the macro economy we've been committed to our responsibility as a major bank and enhanced our credit expansion stabilizing the economy ilpr was down last year and there was some negative impact, but internally our net interest spread was down by 11 basis points, but the balance of interest bearing assets is up by 11.91%. The net interest income is up by 6.2%, which is satisfactory. In 2023, I believe The banking industry will embrace a better economy. The new leadership of the Chinese government aims to expand domestic demand through reform and innovation. and address and mitigate possible risks. This combo of policies will create better opportunities to the banking industry in China. In 2023, we will fully implement the spirit of the 20th National Party Congress and serve the real economy by mitigating financial risks and deepening financial reform. we will stick to our main responsibilities and main business, seeking progress from stability and improve the quality and efficiency of our operation, providing better services to our customers and creating greater value to shareholders. I'd like to focus on some specific areas, especially increasing revenue and reducing cost in terms of Increasing revenue, first of all, we need to maintain the stable progress in net interest income. We have a very high asset adequacy ratio. We will continue to offer greater support to the real economy. So credit expansion and bond investment will rise in a stable and reasonable manner. Our capital adequacy ratio will be enough for us to do that. We need to look for better structured business and high efficiency. Last year, the asset size of our bank was nearly 35 trillion. So there is some potential for structural reform. Over the years, we have been increasing our efforts to adjust major assets and reduce low-interest assets improving on high-interest assets like bonds. Last year, the proportion of these two asset types was up by 0.79%, contributing a lot to business growth. Besides, the CCB attaches great importance to retail credit services, personal loans are 39% in total loan size. Last year, retail loans were not in good markets, but retail loans of our bank maintained very good growth. Mortgage balance was up by 90 billion. Consumer loans and small business loans have achieved 27 and 83% growth respectively. This year, we will see the opportunities of economic recovery and see and increase credit expansion, especially in retail loans. This is about interest income. Secondly, on non-interest income, as you see last year, bank fees and commissions accounted for 15.31%, making us one of the best performing banks in the industry. In 2023, we will seize the opportunities of economic recovery and give full play to our advantage of having multiple licenses In bond issuance, consultancy, wealth management, custodian services, credit cards and consumer loans, we will make a bigger effort. Other non-interest income, other than bank commission income, we will keep a close eye on the changes in equity and bond market and adjust our off-balance sheet and in-balance sheet assets. managing risk exposure well, making sure that we can reduce and minimize the market turbulences and its impact on our non-interest income. On cost, we need to reduce cost and improve efficiency by better cost management. There are three aspects. The first one is asset cost, capital cost. We need to strengthen our thinking operating like a platform and digitalizing business we need to build scenarios and building ecosystems so our financial products can be integrated into customers life scenarios we need to strengthen our customer base both in individual and corporate customers. We offer diversified multiple financial services to customers by offering them by we will receive low cost capital. We strengthened the stratified and categorization of customer management. There were a few numbers which were covered in the presentation. For example, personal customers reached 739 million mobile banking 440 customers CCB Life sold over 100 million customers corporate customers 9.35 million RMB settlement accounts 13.27 million customers inclusive finance 2.53 million customers we are expanding wealth management business achieving very good results personal customers AUM is nearly 17 trillion and private banking's AUM reached around 2.25 trillion RMB the asset management size including fund wealth management trust, pension, et cetera, has reached nearly 600 million. Custodian services have surpassed 19 trillion. We believe with the implementation of our strategies and a higher customer base, higher AUM in personal loans and FP total size Our liabilities and capital cost will be improved a lot. That's for capital cost. Another cost comes from business operation. Last year, cost to income ratio is 28.25%. a good one compared with other banks. In expenses, we have seen increase in staff expenses and a decline of 5.18% in non-staff cost. We have been very strict in reducing expenses, but we strengthen our investment in strategies and technologies. Last year, we invested 23.3 billion RMB in technology. accounting for 13% in our expenses. In the new year, we will strengthen our efforts to control cost, minimizing regular costs so we can spare more investments for strategies and technologies as well as custom expansion. The third one is to reduce the cost of credit services. Credit cost is the highest among all the costs for a bank. The cost was 0.66, down 1%, making new contribution to the business growth of the bank. In the next year, we need to strengthen risk management and we need to learn the lessons from the European and US banks, which went through some crisis. We need to optimize our risk management system and we need to adjust our asset allocation strategy dynamically. We need to coordinate credit risks, liquidity risks, and market risks so we can withstand the test of market cycles and economic cycles and become a balance stone for national economic development.